I’m a tax lawyer based in San Francisco (www.WoodLLP.com), but I handle tax matters everywhere. I enjoy untangling a tax mess from the past, disputing taxes with the government or planning taxes for the future. One of my specialties is advising about lawsuit payments. Whether you’re receiving or paying a legal settlement, you can probably improve your tax position. I write frequently about taxes, from expatriation to sales tax, from selling your company to restitution. I’ve written over 30 tax books, but my best seller is still Taxation of Damage Awards and Settlement Payments. Contact me at wood@WoodLLP.com.

Forget 'Keep Your Plan' And The Website, Obamacare Taxes Are Worse

There is no shortage of complaints about the Affordable Care Act, the unfortunately named massive health-care law still roiling the nation. Embarrassing website issues and keep-your-doctor-keep-your-plan backtracking have occupied center stage. Add to that a kind of Hunger Games, the system’s voracious need to sign up young people to offset the cost for others. Come on down, say the advertisements.

It must be underscored that this isn’t only the President’s law. Congress passed it, and it is hard to get past the naming ironies so prevalent in Washington. Taxes and fees abound, and when it comes out of your pocket, it matters little whether a tax or fee label is applied. In 2014, Americans must dig deeper for the health care they need in ways that don’t meet the eye.

As with many tax laws–and on many fundamental levels, the Affordable Care Act is a tax law–determining exactly where the tax burden falls isn’t always clear. One of the new taxes funds the Patient-Centered Outcomes Research Institute (PCORI). (I wish this institute included “affordable” for it makes a better acronym.) This 2% levy on health plans is expected to collect a cool $8 billion this year alone.

By 2018, annual receipts from the little 2% climb to $14.3 billion. Over a decade, it reaps over $100 billion. Here comes the zinger. Self-insured employers (public companies and 4 of every 5 employers with over 500 employees) don’t have to pay it, according to IRS rules. Oh, but the health plans pay it, right?

That is the Obama administration’s official position. In fact, though, as is plainly no surprise, the insurers pass it along to those who pay the premiums. And that means small employers and people who buy their own insurance have to pay. This is one of the worst features of the new law.

The little guy–small business and the self-employed–have to pay. Kaiser Health News said the new taxes end up on customer bills. One customer’s bill went up by $23.14 a month, or $277.68 annually, for the tax. It meant the person’s monthly premium rose from $322.26 to $345.40.

More taxes? Sure, come on down. A $2 fee per policy too, also earmarked for the Patient Centered Outcomes Research Institute. Insurers also pay a 3.5% user fee to sell medical plans on the HealthCare.gov site. American taxpayers must also pay a 2.3% medical-device tax. There is no doubt where the burden of this tax falls. It will inflate the cost of pacemakers, prosthetic limbs, stents, and more.

That isn’t the end of the higher taxes. Income and payroll taxes go up to fuel the enormous machinery that Obamacare has become. When you pay medical expenses out-of-pocket you should get an income-tax deduction. Americans may be used to deducting medical expenses that exceed 7.5% of their annual income. But now they must eat another 2.5%. The threshold jumps to 10% under the Affordable Care Act. That costs taxpayers about $15 billion over 10 years.

Then there’s the new Medicare tax. Under the Affordable Care Act, individual tax filers earning more than $200,000 and families earning more than $250,000 pay a 0.9% Medicare surtax on top of the existing 1.45% Medicare payroll tax. Then to cap off all this good news, they pay an extra 3.8% Medicare tax on unearned income, such as investment dividends, rental income and capital gains. If you sold your house in 2012, you paid a maximum 15% federal capital gain tax on profits above $250,000 per individual or $500,000 per couple. Now, depending on your income level, you may pay as much as 23.8% on gains above that level.

Welcome. Come on down.

You can reach me at Wood@WoodLLP.com. This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.

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Another “We told you so” from those of us that can spot a congenital liar a mile away. I am a union member and during our last contract negotiations the President’s emergency board with which he concurred, told us to accept the contract being offered to us or, in their words, “get worse”. We didn’t get worse but we did get “bad”. Our healthcare costs went up substantially with deductibles going up every 6 months. I seem to remember him saying that costs would go down about $2500.00 per year instead. Don’t anyone try to tell me what is when I am living with his lies. I and many others tried to point out that his outrageous claims simply could not be true but far too many people in this country these days are obviously too stupid to be allowed to vote.

This article reports that Congress also passed it. It fails to mention Democratic Congressmen and women are the ONLY congress members that voted for it. I say let the Democrats pay for this and leave the rest of us ALONE!

Thank you Mr. Woods for detailing another issue with ACA. Without question, the worst and most costly law to ever pass Congress.

I do see a benefit to ACA. ACA will cost America trillions of dollars in years to come with no benefit to WORKING Americans. ACA is simply another entitlement program that Democrats hope with ensure future votes for their party long term. The benefit that I see with ACA is that Americans will pay dearly for voting for Obama & ACA. Everyone should pay for their mistakes and ACA is a mistake that will cost every Working American for the rest of their life’s. America voted for ACA, it is the law and now it is time to pay.

One last comment, Obama is the greatest failure of all time. Jimmy Carter is now #2.

There are some benefits I’m sure, but any benefit can’t really be considered without taking cost into account. I hadn’t thought of the benefit you imply is a pendulum swing. That did happen with Jimmy Carter too.

There may be benefits but could we have achieved these benefits through other means such as other proposals brought by Republicans. All efforts by the Republican party are laughed at and were never considered as alternative options. If one of the main goals of the ACA was to lower the costs of health care then why would they not include interstate insurance plans? This would be step number 1 if they actually cared about lowering costs. This omission leads me to think they want the private market to fail so the Government can come in with a single payer system. Why else wouldn’t they consider interstate plans? That makes it even more ironic that they need to bring in CEO’s from top private companies to help fix their broken Healthcare exchange website.